Interest rate

Rule of 72: No.  of years needed to double your money= 72/ Rate of Return.

Now let us take the most important variable in the rule 72 formula. The “Interest Rate” or the return that can be generated from investments under different options: What are the options available in order of diminishing returns?

Investment in outstanding businesses through direct Equity   

Investment: Can generate returns in excess of 20% year after  

year over 5-10 years period.

Investment in selected mutual funds: Can expect returns of  over
15 % p.a.over a period of 10 years in good funds.

Investment in company fixed deposits: Can expect returns of
over 10-11% in good companies..

Investment in bank’s fixed deposits: Can give returns of 8-9% p.a
for 3 years or more..

Our endeavor has been to look for an investment options which can be achieved over a period of 10 years or more with reasonable risk without losing our principal amount. We have, therefore, bench marked “Interest rate of at least 20 % p.a.” We are, therefore, discussing in our writings only those stocks which are likely to generate compounded returns of 20% p.a. or more with reasonably high level of security and surety that our capital will not erode during the investment period.of 5-10 years.

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